Pilot Flying J Takes Steps to Address Investigation Issues

Pilot Flying J Takes Steps to Address Investigation Issues

KNOXVILLE, Tenn. -- One week after federal authorities raided the headquarters of Pilot Flying J over alleged rebate fraud, the company is taking action to address issues raised in the investigation.

Speaking at a press conference this afternoon, CEO Jimmy Haslam explained that, as it appears to the Knoxville, Tenn.-based company, the federal investigation focuses on "a narrow slice" of Pilot Flying J's business in which rebates on diesel fuel purchases are manually calculated and paid to a "relatively small number" of its 3,300 trucking company customers.

STEP BY STEPAs Pilot Flying J continues to cooperate with the FBI and the Internal Revenue Service (IRS) investigation, Haslam announced five steps the truck stop company is taking to address several issues that came to light as a result of the investigation.

Pilot Flying J is immediately bringing its field audit team to Knoxville to review all 3,300 contracts with its trucking company customers, not just the few in the federal affidavit, and to proactively address any miscalculations that the company may find.

The company has placed on administrative leave several members of its diesel fuel sales team and, on an interim basis, it is restructuring that team pending further investigation to get control of that operation and restore confidence to our customers.

Haslam has directed that all of diesel fuel customers be converted to electronic calculation and payment, eliminating future risks of any abuse that might be enabled by manual calculation and payment. This process is expected to be completed by June 30.

He asked Pilot Flying J's outside counsel to help the company create and staff a position of chief compliance officer to report to the company's general counsel to deal with any similar questions or issues that might come up in the future. Haslam expects to have this position filled within 30 days.

In a special meeting on Sunday, the company's board voted to hire an independent special investigator to oversee and validate all of its internal inquiries related to the federal investigation.

"Our goal is to understand the entirety of that part of our business, not just the manually processed contracts. If we find an underpayment, we will encourage the affected customer to review our finding, test with their own audit if they like, and if we owe them money, we will write them a check immediately," Haslam said.

"We will be communicating this plan directly to our trucking company customers and moving through this process as quickly as possible. I hope this process won't take more than four to eight weeks, but the important thing is that we get it right," he added.

Haslam also noted that he would be meeting with Curt Morehouse with W.N. Morehouse Truck Line Inc. of Omaha, Neb., and Tommy Hodges with Shelbyville, Tenn.-based Titan Transfer Inc. to discuss concerns.

In a USA Today report this weekend, both Morehouse and Hodges said they noticed discrepancies in their rebate checks. After questioning the changes, Pilot Flying J moved both companies off the rebate program and gave them discounts directly at the pump.

Haslam said the company will not publicly name the employees placed on administrative leave. In addition, Pilot Flying J is "not judging the guilt or innocence of the team members."

"We know this process is going to be difficult and probably will last for a while, but we are not going to sit by idly in the meantime," he said. "We are going to diligently and aggressively figure out for ourselves what's going on, and if we find anything amiss, we are going to make it straight right away."

LEGAL FRONTThe company's actions come two days after Atlantic Coast Carriers, based in Hazelwood, Ga., became the first company to file a lawsuit against Pilot Flying J in the wake of the April 15 raid. The trucking company has also asked a local court for class-action status. If the status is approved, more companies could join the suit, Knoxville's WBIR reported.

"Pilot Flying J's counsel has advised them that it is not unusual for lawsuits like this to be filed. They are reviewing it and will defend it accordingly," a company spokesperson told CSNews Online.

Atlantic Coast Carriers' lawsuit alleges Pilot converted consumer rebate funds to its own use, committed a pattern of racketeering activity that made the plaintiff lose money, and only partially carried out obligations of their contract.

The lawsuit also states Atlantic Coast deserves all the money it was promised, as well as punitive damages and attorney fees, according to the local news station.

The lawsuit states, "Atlantic Coast and other similar consumers are entitled to the rebates funds withheld by Pilot pursuant to Pilot's agreements and promises to fully and faithfully pay rebate funds to its consumers."

Atlantic Coast Carriers is not listed in the federal affidavits or search warrants as one of the companies allegedly defrauded.

Pilot Flying J is a family-owned business that was started by Haslam's father in 1958. The company operates more than 650 retail locations and is the largest operator of travel centers and travel plazas in North America.